Budget 2014 – What we know already #2

Abolition of Employers NI for Under 21s

Employers’ (Class 1 secondary) National Insurance contributions will be abolished for employees under the age of 21. This will be effective from 6 April 2015 and applies to earnings paid up to the Upper Earning Limit.

Employment Allowance

The Employment Allowance can be claimed from 6 April 2014 in a move which will see employers cut their NI bills by up to £2,000. The claims will be made through payroll software and it is hoped the move will stimulate further employment.

Corporation Tax

Due to fall from 23% to 21% from April 2014 and to align with the small companies rate of 20% from April 2015.

Transfer of Personal Allowance between spouses

In a nod to supporting marriage within the tax system, from April 2015, a spouse not liable to income tax or not liable beyond the basic rate is able to transfer up to £1,000 of personal tax allowance to his/her spouse or civil partner providing the recipient of the transfer is not liable to tax at the higher rate. This means that up to £200 in tax can be saved by effecting the transfer. Business leaders have suggested the maximum transfer be raised in line with the new allowance of £10,000 to have any real impact on a couples’ finances.

Extension of Help to Buy Scheme

The Help to Buy scheme was a surprise announcement at last year’s Budget with the measure designed to encourage first time buyers and those struggling to secure loans  onto and up the housing ladder.  There are two parts to the scheme; the first provides an interest free loan on new build properties and is open to first time buyers as well as existing homeowners. The second part of the scheme has proved to be more controversial, offering a taxpayer-backed loan on mortgages of up to 95% loan to value. It has been difficult to measure the impact of Help to Buy as increased movement in the housing market has coincided with the wider economic recovery. It was announced last weekend that the Help to Buy scheme would be extended by four years to 2020.

Pension relief

From April 2014, tax relief on pension contributions will be capped at £40,000 p.a. and lifetime pension savings capped at £1,250,000 with rumours circulating that lump sum drawdowns will become taxable.

Capital Gains Tax ‘Holiday’ to be halved

From April 2014, gains on the sale of a main residence will be exempt for up to 18 months after the owners have moved out. The current exemption period is 3 years.

Tax free childcare scheme

From September 2015 working parents can receive up to £2,000 per year per child on qualifying childcare costs. The scheme will include children of up to 12 years of age within a year of commencing.

Personal

From 6 April 2014, the personal tax allowance will rise to £10,000. There is speculation that this amount could increase further from April 2015 to £10,500. The higher rate threshold will rise to £41,865, representing a 1% increase. It will be interesting to see how Chancellor Osborne reacts to calls to increase this amount more in line with inflation as it is estimated that an additional 1 million taxpayers will be dragged into the 40% tax net.

Salaried partners will be taxed in line with employees for income and corporation tax, where certain conditions are met. There are also changes surrounding the allocation of profits within partnerships.

From 6 April, tax advantaged share schemes will be subject to self-certification with HMRC and the rules around this have been simplified.

We will be sending out our Budget highlights on the afternoon of the Budget. This will also be on our website.

If you would like to discuss anything surrounding Budget 2014, please contact Curo’s head of tax, Julia Whelan [email protected] or call Julia on 01527 558539..

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